NFIP was mentioned in the hurricane thread. The media often misrepresents it as subsidized full coverage. It has a limit of $250k on residential and $500k commercial. Soooo, those million-dollar beach cottages that are swept away? The owner takes a big hit unless he's bought wildly expensive Excess Flood Insurance from Lloyd's or somesuch.
Quote from: rcjordan on October 11, 2018, 02:13:09 AM
unless he's bought wildly expensive Excess Flood Insurance from Lloyd's or somesuch.
Yup... that's me. Not flood of course. The other F-word. All the high-risk insurers, who go by several names, lead back to Lloyd's.
"Specifically, uninsured flood loss for the same {NC,SC,VA) area is estimated to be between $13 billion and $18.5 billion. Wind losses are estimated to be an additional $1 billion to $1.5 billion."
Or roughly 3-4 times the estimated insured loss.
https://www.corelogic.com/news/the-aftermath-of-hurricane-florence-is-estimated-to-have-caused-between-20-billion-and-30-billion-in-flood-and-wind-losses-cor.aspx
Flood Insurance 2.0
The Democratic Fight Over a New Climate Policy - The Atlantic
https://www.theatlantic.com/politics/archive/2021/12/democrats-climate-change-flood-insurance/620954/?utm_source=feed
Flood insurance has to be reformed sooner or later. It just a matter of time before federal flood insurance gets phased out for many beach front buildings (I'm looking at you Florida.)
The article doesn't say how much people pay for flood insurance to start with, but the comment that premiums would change by only $100/mo in the new system makes me think the base is very low.
We got dropped by our insurer and had to go to the state-backed California FAIR Plan. I pay $7800 for $500,000 in coverage.
If I assume that the insurance company will get a 4% return on the money I give them, that means that roughly speaking, they plan to pay out a total loss once every 32 years. If I switch to a 2% return, than it takes 41 years to hit breakeven. Given that my neighborhood is 56 years old and has had only one house burn down in that period (dryer fire, not forest fire) it doesn't seem like the premium is way off. I think the reason that we can't get regular coverage even at that rate is not that the odds are bad, but that a single event that takes out 1,000 houses at $500,000 each is a $500 million payout and that's tough for an insurance company to handle in a single event.
I don't know that the solution is. When we moved in, we had a choice many insurers. It didn't occur to us 19 years ago that it would become impossible to insure a house on the open market. On the other hand, people respond to price signals and other signals. So with respect to fire, insurers will need to do things like inspect properties for fire safety and possibly have rules about whether or not you can rebuild in the same spot. I know for flood insurance, there are people who have collected 2 and 3 times in the lifetime of a single owner. That seems to be a huge part of the problem.
>4% return on the money I give them, that means that roughly speaking, they plan to pay out a total loss once every 32 years
Using coastal state-backed wind coverage as a guide, these are notorious for being significantly underfunded. State politicians don't want to face voter wrath for pricing it using underwriters' math. They count on it being region events, but if a mega-event hits they're broke.